Currently we are experiencing unprecedented conditions with a Global pandemic upon us and a global recession just around the corner. In this scenario oil prices are falling, investors are holding their money tight and renewable markets are embracing for shocks, as the international supply demands patterns are changing very swiftly. Now the only questions on everyone’s mind is what is going to happen next and are we going to continue like this; is Solar done or is it just a new beginning. We will systematically analyze where we are and where we will be in 2 years from now with this pandemic and what are the key factors of growth and dynamics that are going to carve the future of Solar.
Oil price has been on a roller coaster ride with crude oil price reaching as low as $ 14 a barrel; to some countries even giving money to just get rid of their excess oil or the rare negative price barrel, as ridiculous it sound, however its true as crude oil is a byproduct for natural gas suppliers and there is limited storage for byproducts. But will this continue, well no and will the price go up unfortunately that will happen however it will not be a huge rise.
Lets look at the global trend of oil at a glance in the figure 1 above, we are as per today are at the same level as what we were in 2006, i.e also known as the most recent modern age recession faced globally. Based on the pattern we see oil prices are going to rise but! wait wait! apples cannot be compared with oranges and what about the millions of people without jobs and the tourist industry how come oil price will rise again. Well sadly it will but not much as some people predict. As per some estimates price of oil will stabilize to $ 44-48 dollars and stay in this position for the next year. A new slogan live with the virus meaning we will soon see a raise in the demand of oil as new SoPs will indirectly increase the global demand of oil. However given the economic slow down the increasing oil price above $ 48 dollars may push the world in to an economic depression given a depression will mean sharper oil price drop, so the price of oil is not seeing a peak any time soon.
Again to the prime question where do it place Solar well for this we have to dig further into the energy consumption patterns of the world i.e post pandemic, I will only take the California’s energy patterns to explain how global and pandemic is shaping the electricity demand curve. As per the below shown figure 2 its important to know that COVID 19 is dropping demand even lower during peak solar hours resulting lower demand. If this pattern continues, it may result in reduction of solar PV demand in the grid tied solar as power distributors do not seem to have any benefit in promoting solar.
Energy independence is a sociological factor that prevails in the time of recession. This has been seen in 2006 after which solar energy started its boom in residential solar market, with money pouring in from government in form of tax rebates and subsidies. However this might not happen this time based on the fact that demand is falling in the day time at least power purchasers will not be looking at solar globally for some time also we have cheap fossil fuel available too. As per IHS market report we are already seen slow down in solar PV installation however this is mainly due to supply chain issues due to covid-19 this means that we are having to deal with backlog (Figure 3). However this backlog will shift into 2022 meaning that we will see increase in EPC and O&M sector in 2022 that will be covering up the backlog, but its due to the factors of uncertainty markets are not showing increase in demand but moving the growth 2 years ahead (figure 4), highlighting the current mood of investors and global commitment towards climate change.
What will grow the answer is the technologies that shave the impact of renewable that is energy storage systems will see a sharp raise in investment. As developed nations will be looking for solutions to store excessive energy supplies for later use as a new global climate change initiative soon.
Currently the CERs price has gained few cents and is around $ 2.00, stating that governments and investors are looking towards this direction, that is promoting the renewable energy even further, which will result in shutting down of old fossil fuel based power plant and injecting more renewable in the system, however not in the near future. In conclusion we are looking at a growth in near future because of the backlog shift that prior commitments of governments and power purchaser projects. But for future we need to closely look at the energy polices of the developed nations in light of this pandemic I will look into this in my upcoming article.